Of Course You Don't Like Your HMO

It's because your employer chose your health plan, and you didn't.

Given the increasingly angry complaints lodged against managed-care health plans by consumers, you'd think that the plans would be losing business. Instead, managed-care enrollment is climbing. A study in this month's Health Affairs explains why: Bosses decide what health plan you will have, and more of them are deciding that you will have managed care, like it or not. Besides explaining why competition and consumer ire aren't slowing the managed-care juggernaut, these findings also suggest that tougher regulations are unlikely to make insurers serve patients better.

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Managed-care programs, which include health-maintenance organizations and preferred-practice organizations, limit member patients to specific doctors and hospitals. The goal of the plans, of course, is to hold costs down. HMOs are the most restrictive plans, only covering patients who see their specified care providers. PPOs are the least restrictive, offering coverage with minimal payments if patients visit the plan's doctors, and with larger payments if they go outside the network for care. Only old-style "indemnity" insurance gives patients uniform coverage no matter where they go. Nowadays, HMOs account for coverage of 50 percent of privately insured workers--and that number is rising. Only a quarter of all workers have indemnity insurance.

What patients hate about managed-care plans are cost-cutting mandates that shorten hospital stays and doctor visits and make it difficult for patients to see specialists. (No wonder popularity polls reveal that only tobacco companies rank lower than managed-care programs.) Increasingly, patients and their allies are seeking legislative remedies--currently, more than 1,000 bills that would regulate managed-care plans are pending in state legislatures, 80 in California alone. And early next year, President Clinton will introduce his own legislative package.

Typically, the proposals loosen the restrictions. Already in effect are new federal laws requiring all insurers to pay for two-day stays after uncomplicated childbirth, and for four-day stays after Caesarean sections. Many states are now considering bills that would stipulate two-day stays after mastectomies, direct access to obstetrician/gynecologists without a referral, and automatic coverage for almost any emergency visit.

But what about hospital stays after heart surgery or a stroke? And after appendectomies, prostate operations, pneumonia? We don't really want the government directing our care any more than we want insurers to. What's more, piecemeal regulation is bound to fail. If an insurer's priority is cheap health care, it will find a thousand other unpalatable ways to economize.

Political conservatives and the managed-care industry argue that the market should be let alone to sort things out. They believe that the managed-care backlash is fomented in irrationality. The same consumers who whine about managed care refuse to pay the extra cost of indemnity insurance. In 1996, average family coverage costs under managed care were $5,071, and $5,388 under indemnity plans (plus deductibles and copayments were usually higher, too).

But fewer workers are given that choice today, according to the Health Affairs study from consulting company KPMG Peat Marwick. The study found that 80 percent of small- and medium-sized companies that give workers health benefits offer just one plan. Forty-seven percent of large companies offer no choice of plan either. What's more, employers are aggressively switching their workers to managed care. In 1988, smaller companies gave few employees a choice, but 92 percent offered indemnity insurance. Now only 33 percent offer indemnity. Even the hospital where I practice medicine dropped its Blue Cross indemnity plan and now offers managed care exclusively.

Employers mainly pick insurers on the basis of price, and often switch plans in pursuit of the lowest cost. So we shouldn't be surprised that patients aren't happy or that insurers aren't bending over backward to please them. Employers are the consumers in the health-care-insurance marketplace, not the patients. It's like when your mother picked your clothes for you. The only one happy with what you got was your mother.

E mployers resist letting some workers pick more expensive plans and cover the extra costs themselves because most insurers insist that companies--especially small companies--deliver all their employees to the plan. Also, most employers would rather send one big check to their insurer each month than deal with the paperwork hassle of a bunch of different insurers.

Lost in the managed-care rumble is this question: Why do employers provide health insurance in the first place? After all, they don't offer employees car insurance. Health insurance became a standard benefit during World War II. Wage and price controls then in effect prevented employers from giving raises, but because the government regarded health insurance as a tax-free benefit, employers used it to fatten compensation packages for workers. If car insurance were a tax-free benefit, it wouldn't be surprising to find employers picking low-cost insurers who make you visit "preferred" mechanics and skimp on coverage for Land Rovers and minivans. Angry consumers would complain about cheapo car care. To appease consumers without upsetting the business lobby, legislators would probably require overnight stays after brake and lube jobs.

The most straightforward way to put choices back into families' hands would be to sever the connection between health insurance and work. If health benefits were taxed as income, people would promptly demand that the cash be paid directly to them and that they be allowed to choose their own insurance. Insurers would then have to cater to their needs. Short of that radical change, effective legislation should be passed to increase choices for employees. Some states have established insurance-buying groups that employers can join. These groups give workers a selection of plans and reduce paperwork hassles for employers. Legislation could expand such groups. Some suggest that the law require employers to offer both a managed-care plan and an indemnity plan, as it did in the 1970s when HMOs were first created.

This week, the president's advisory commission drafting his consumer-protection proposals endorsed a host of patients' rights, including the right to appeal mistreatment by insurers. But employers on the panel scuttled all concrete measures to return choice to consumers. The new rights are nice enough; they'll move consumers a few seats forward on the bus. But employers are still driving, and that's all that counts.

Atul Gawande, M.D., writes a regular column on science and policy for Slate.